In a significant development, the bankrupt cryptocurrency exchange FTX has received the green light from a Delaware court to liquidate its crypto assets, valued at approximately $3.4 billion. This move is part of the exchange’s ongoing efforts to reimburse customers who suffered losses during its notorious collapse.
FTX’s substantial crypto holdings include a diverse range of digital currencies, with Solana (SOL), Bitcoin (BTC), Ether (ETH), Aptos (APT), and XRP ranking as the top five assets. Notably, Tether (USDT) is exempt from this liquidation process, given its stablecoin status.
As of the latest figures, FTX’s crypto assets break down as follows: $1.1 billion in SOL, $560 million in BTC, $192 million in ETH, $137 million in APT, and $119 million in XRP. The USDT stablecoin holdings amount to approximately $120 million, which is considered to have a lower impact on the cryptocurrency market.
Asset Recovery Efforts
FTX’s journey toward recovery has been substantial, with the company having already retrieved crypto and real-world assets totaling around $7 billion. However, the exchange regards its crypto assets as among the most liquid, making them prime candidates for sale to compensate affected customers.
Liquidation Proposal Safeguards
During the court hearing that led to this approval, US Bankruptcy Judge John Dorsey endorsed FTX’s liquidation proposal. Importantly, this plan incorporates safeguards aimed at mitigating potential adverse effects on cryptocurrency prices.
Among these safeguards is a provision allowing the FTX bankruptcy estate to sell up to $100 million worth of crypto assets weekly. Additionally, the company will engage in hedging and staking agreements to minimize price volatility and generate passive income from the assets.
Support from Stakeholders
FTX’s liquidation proposal received support from key stakeholders, including the official bankruptcy committee and a group representing customers who held funds on the international FTX.com platform prior to the bankruptcy filing.
Judge John Dorsey also permitted the possibility of both bankruptcy parties agreeing to raise the weekly sales limit to $200 million if deemed necessary.
Galaxy Digital’s Oversight
To oversee the complex liquidation process, FTX’s bankruptcy estate has enlisted the expertise of Galaxy Digital, an institution-focused US trading firm. Galaxy Digital will serve as an investment adviser and play a crucial role in preventing any “information leaks” that could trigger market short-selling of crypto assets due to FTX’s sales during the liquidation period.
Lengthy Road to Refunding
FTX’s new leadership anticipates that the process of refunding creditors may extend up to two years. While there are no guarantees, there is optimism that between 50% to 70% of the lost funds may be recovered through the bankruptcy process.
This development marks a critical step in FTX’s efforts to address the fallout from its collapse and underscores the intricate nature of managing substantial crypto assets in the cryptocurrency industry. Stakeholders will be closely monitoring the liquidation process as it unfolds.